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Item 1. Financial Statements

2023-05-11 compared with 2022-11-10 · 181 added, 275 removed, 169 unchanged (73% of the section changed)

3 unchanged sentences

Three months ended

September 30,

Nine months ended

September 30,

Income from net profits interest

Cash on hand used (withheld) for Trust expenses

Cash on hand withheld for Trust expenses

General and administrative expenses (1)

Distributable income

Distributions per Trust unit (17,000,000 Trust units issued and outstanding at September 30, 2022 and 2021)

(1) Includes $28,860 and $54,435 paid to VOC Brazos Energy Partners, LP (“VOC Brazos”) during the three months ended September 30,

2022 and 2021, respectively, and $85,470 and $108,870 during the nine months ended September 30, 2022 and 2021, respectively.

includes $37,500 paid to The Bank of New York Mellon Trust Company, N.A.

during each of the three months ended September 30, 2022

and 2021 and $112,500 during each of the nine months ended September 30, 2022 and 2021, respectively.

Distributions per Trust unit (17,000,000 Trust units issued and outstanding at March 31, 2023 and 2022)

Includes $28,860 and $27,750 paid to VOC Brazos Energy Partners, LP (“VOC Brazos”) during the three months ended March 31, 2023 and 2022, respectively, and $37,500 paid to The Bank of New York Mellon Trust Company, N.A.

during each of the three-month periods ended March 31, 2023 and 2022.

CONDENSED STATEMENTS OF ASSETS AND TRUST CORPUS

September 30,

Cash and cash equivalents

3 unchanged sentences

(126,792,167 )

Trust corpus, 17,000,000 Trust units issued and outstanding at September 30, 2022 and December 31, 2021

Trust corpus, 17,000,000 Trust units issued and outstanding at March 31, 2023 and December 31, 2022

CONDENSED STATEMENTS OF CHANGES IN TRUST CORPUS

Three months ended

September 30,

Nine months ended

September 30,

Trust corpus, beginning of period

Income from net profits interest

Cash distributions

(15,470,000 )

Cash distribution

Trust expenses

6 unchanged sentences

Organization of the Trust

VOC Energy Trust (the “Trust”) is

a statutory trust formed on November 3, 2010 (capitalized on December 17, 2010), under the Delaware Statutory Trust Act pursuant

to a Trust Agreement dated November 3, 2010 (as amended and restated on May 10, 2011, the “Trust Agreement”) among

VOC Brazos Energy Partners, L.P., a Texas limited partnership (“VOC Brazos”), as trustor, The Bank of New York Mellon Trust

Company, N.A., as Trustee (the “Trustee”), and Wilmington Trust Company, as Delaware Trustee (the “Delaware Trustee”).

VOC Energy Trust (the “Trust”) is a

statutory trust formed on November 3, 2010 (capitalized on December 17, 2010), under the Delaware Statutory Trust Act pursuant

to a Trust Agreement dated November 3, 2010 (as amended and restated on May 10, 2011, the “Trust Agreement”) among

VOC Brazos Energy Partners, L.P., a Texas limited partnership (“VOC Brazos”), as trustor, The Bank of New York Mellon Trust

Company, N.A., as Trustee (the “Trustee”), and Wilmington Trust Company, as Delaware Trustee (the “Delaware Trustee”).

The Trust was created to acquire and hold a term net profits interest for the benefit of the Trust unitholders.

2 unchanged sentences

VOC Kansas Energy Partners, L.L.C.,

a Kansas limited liability company (“VOC Kansas”), is a privately held limited liability company engaged in the production

and development of oil and natural gas from properties primarily located in Kansas along with a limited number of Texas properties.

connection with the closing of the initial public offering of units of beneficial interest in the Trust (“Trust Units”) in

May 2011, VOC Brazos acquired all of the membership interests in VOC Kansas in exchange for newly issued limited partner interests

7 unchanged sentences

the net profits interest to the Trust.

We refer to the properties in which the Trust holds the net profits interest as the “underlying

properties.”

The net profits interest is passive in nature,

1 unchanged sentence

The net profits

interest entitles the Trust to receive 80% of the net proceeds attributable to VOC Brazos’ interest from the sale of production

interest entitles the Trust to receive 80% of the net proceeds attributable to VOC Brazos’

interest from the sale of production

from the underlying properties during the term of the Trust.

The net profits interest will terminate on the later to occur of (1) December 31,

2030 or (2) the time when 10.6 million barrels of oil equivalent (“MMBoe”) (which is the equivalent of 8.5 MMBoe

in respect of the net profits interest) have been produced from the underlying properties and sold, and the Trust will soon thereafter

wind up its affairs and terminate.

As of September 30, 2022, cumulatively, since

inception, the Trust has received payment for 80% of the net proceeds attributable to VOC Brazos’ interest from the sale of 8.0

MMBoe of production from the underlying properties (which is the equivalent of 6.4 MMBoe in respect of the net profits interest).

The Trustee can authorize the Trust to borrow

money to pay administrative or incidental expenses of the Trust that exceed cash held by the Trust.

The Trustee may authorize the Trust

to borrow from the Trustee or the Delaware Trustee as a lender provided the terms of the loan are similar to the terms it would grant

to a similarly situated commercial customer with whom it did not have a fiduciary relationship.

The Trustee may also deposit funds awaiting

distribution in an account with itself and make other short-term investments with the funds distributed to the Trust.

As of March 31, 2023, cumulatively, since

inception, the Trust has received payment for 80% of the net proceeds attributable to VOC Brazos’

interest from the sale of 8.3 MMBoe

of production from the underlying properties (which is the equivalent of 6.6 MMBoe (unaudited) in respect of the net profits interest).

The Trustee can authorize the Trust to borrow money

to pay administrative or incidental expenses of the Trust that exceed cash held by the Trust.

The Trustee may authorize the Trust to borrow

from the Trustee or the Delaware Trustee as a lender provided the terms of the loan are similar to the terms it would grant to a similarly

situated commercial customer with whom it did not have a fiduciary relationship.

The Trustee may also deposit funds awaiting distribution

in an account with itself and make other short-term investments with the funds distributed to the Trust.

Basis of Presentation

1 unchanged sentence

and Trust Corpus as of December 31, 2022, which has been derived from audited financial statements, and the unaudited interim condensed

financial statements as of September 30, 2022 and for the three- and nine-month periods ended September 30, 2022 and 2021, have

been prepared pursuant to the rules and regulations of the Securities and Exchange Commission (the “SEC”).

certain information and note disclosures normally included in annual financial statements have been condensed or omitted pursuant to those

rules and regulations.

financial statements as of March 31, 2023 and for the three-month periods ended March 31, 2023 and 2022, have been prepared

pursuant to the rules and regulations of the Securities and Exchange Commission (the “SEC”).

Accordingly, certain information

and note disclosures normally included in annual financial statements have been condensed or omitted pursuant to those rules and

The preparation of financial statements requires

7 unchanged sentences

The financial information should be read in conjunction

with the financial statements and notes thereto included in the Trust’s Annual Report on Form 10-K for the year ended December 31,

Trust Accounting Policies

4 unchanged sentences

production and property taxes) and an adjustment for lease equipment costs and lease development expenses (which are capitalized in financial

statements prepared in accordance with accounting principles generally accepted in the United States of America (“U.S.

GAAP”))

of the underlying properties, times 80%.

2 unchanged sentences

The actual cash distributions of the

Trust will be made based on the terms of the conveyance that created the Trust’s net profits interest.

Trust will be made based on the terms of the conveyance creating the Trust’s net profits interest.

Expenses of the Trust, which

16 unchanged sentences

There was no impairment of the investment in the net profits interest

during the quarters ended September 30, 2022 or 2021.

No new accounting pronouncements were adopted

or issued during the quarter ended September 30, 2022 that would impact the financial statements of the Trust.

during the quarters ended March 31, 2023 or 2022.

No new accounting pronouncements were adopted or

issued during the quarter ended March 31, 2023 that would impact the financial statements of the Trust.

Investment in Net Profits Interest

12 unchanged sentences

Three months ended

September 30,

Nine months ended

September 30,

Excess of revenues over direct operating expenses and lease equipment and development costs (1)

4 unchanged sentences

(1) Excess of revenues over direct operating expenses and lease equipment and development costs reflect expenses and costs incurred by

VOC Brazos during each of the March through May production periods for the three months ended September 30 and during each

of the September through May production periods for the nine months ended September 30.

Pursuant to the terms of the conveyance

of the net profits interest, lease equipment and development costs are to be deducted when calculating the distributable income to the

VOC Brazos during the September through November production period.

Pursuant to the terms of the conveyance of the net profits

interest, lease equipment and development costs are to be deducted when calculating the distributable income to the Trust.

(2) Pursuant to the terms of the conveyance of the net profits interest, VOC Brazos can reserve up to $1.0 million for future development,

maintenance or operating expenditures at any time.

During the three months ended September 30, 2022 and 2021, and the nine months

ended September 30, 2022 and 2021, VOC Brazos did not withhold or release any dollar amounts due to the Trust from the reserve.

reserve balance was $1.0 million at September 30, 2022 and 2021.

During the three months ended March 31, 2023 and 2022, VOC Brazos did not withhold

or release any dollar amounts due to the Trust from the reserve.

The reserve balance was $1.0 million at March 31, 2023 and 2022.

(3) The income from net profits interest is based upon the cash receipts from VOC Brazos for the oil and gas production.

1 unchanged sentence

thus, the cash received by the Trust during the three

months ended September 30, 2022 substantially represents production by VOC Brazos from March 2022 through May 2022, and

the cash received by the Trust during the three months ended September 30, 2021 substantially represents production by VOC Brazos

from March 2021 through May 2021.

The cash received by the Trust during the nine months ended September 30, 2022 substantially

represents production by VOC Brazos from September 2021 through May 2022 and the cash received by the Trust during the nine

months ended September 30, 2021 substantially represents production by VOC Brazos from September 2020 through May 2021.

For the three and nine months ended September 30,

months ended March 31, 2023 substantially represents production by VOC Brazos from September 2022 through November 2022.

The cash received by the Trust during the three months ended March 31, 2022 substantially represents production by VOC Brazos from

September 2021 through November 2021.

For the three months ended March 31, 2023

and 2022, MV Purchasing, LLC, an affiliate of VOC Brazos, purchased a significant portion of the production of the underlying properties.

4 unchanged sentences

Distributions to Unitholders

VOC Brazos makes quarterly payments of the

net profits interest to the Trust.

The Trustee determines for each quarter the amount available for distribution to the Trust

This distribution is expected to be made on or before the 45 th day following the end of each quarter to

the Trust unitholders of record on the 30th day of the month following the end of each quarter (or the next succeeding business

Such amounts will be equal to the excess, if any, of the cash received by the Trust relating to the preceding quarter, over

the expenses of the Trust paid for such quarter, subject to adjustments for changes made by the Trustee during such quarter in any

cash reserves established for future expenses of the Trust.

As previously disclosed, the Trustee intends to build a reserve of

approximately $1.175 million for the payment of future known, anticipated or contingent expenses or liabilities.

may increase or decrease the targeted amount at any time and may increase or decrease the rate at which it is withholding funds to

build the cash reserve at any time, without advance notice to the unitholders.

Cash held in reserve will be invested as required by

the Trust Agreement.

VOC Brazos makes quarterly payments of the net

profits interest to the Trust.

The Trustee determines for each quarter the amount available for distribution to the Trust unitholders.

This distribution is expected to be made on or before the 45th day following the end of each quarter to the Trust unitholders of record

on the 30th day of the month following the end of each quarter (or the next succeeding business day).

Such amounts will be equal to the

excess, if any, of the cash received by the Trust relating to the preceding quarter, over the expenses of the Trust paid for such quarter,

subject to adjustments for changes made by the Trustee during such quarter in any cash reserves established for future expenses of the

Beginning in the first quarter of 2022, the Trustee withheld a portion of the proceeds otherwise available for distribution each

quarter to build a reserve of approximately $1.175 million for the payment of future known, anticipated or contingent expenses or liabilities

of the Trust.

The Trustee may increase or decrease the targeted amount at any time and may increase or decrease the rate at which it is

withholding funds to build the cash reserve at any time, without advance notice to the unitholders.

Cash held in reserve will be invested

as required by the Trust Agreement.

Any cash reserved in excess of the amount necessary to pay or provide for the payment of future known,

anticipated or contingent expenses or liabilities eventually will be distributed to unitholders, together with interest earned on

anticipated or contingent expenses or liabilities eventually will be distributed to unitholders, together with interest earned on the

The targeted $1.175 million cash reserve was fully funded by February 2023 and is included in cash and cash equivalents on the

accompanying Condensed Statements of Assets and Trust Corpus.

The first quarterly distribution during 2023 was

$4,250,000, or $0.25 per Trust Unit, and was made on February 14, 2022 to Trust unitholders owning Trust Units as of February 1,

$3,910,000, or $0.23 per Trust Unit, and was made on February 14, 2023 to Trust unitholders owning Trust Units as of January 30,

Such distribution included the net proceeds of production collected by VOC Brazos from October 1, 2022 through December 31,

2021 and was net of $182,917 withheld by the Trustee towards the building of the cash reserve described above.

The second quarterly distribution during 2022 was

$4,760,000, or $0.28 per Trust Unit, and was made on May 13, 2022 to Trust unitholders owning Trust Units as of May 2, 2022.

distribution included the net proceeds of production collected by VOC Brazos from January 1, 2022 through March 31, 2022 and

was net of $182,917 withheld by the Trustee towards the building of the cash reserve described above.

The third quarterly distribution during 2022 was

$6,460,000, or $0.38 per Trust Unit, and was made on August 12, 2022 to Trust unitholders owning Trust Units as of August 1, 2022.

distribution included the net proceeds of production collected by VOC Brazos from April 1, 2022 through June 30, 2022 and was net of $221,666

withheld by the Trustee towards the building of the cash reserve described above.

2022 and was net of $231,030 withheld by the Trustee towards the building of the cash reserve described above and with that amount, the

targeted reserve was fully funded.

The first quarterly distribution during 2022 was

1 unchanged sentence

Such distribution included the net proceeds of production collected by VOC Brazos from October 1, 2021 through December 31,

The second quarterly distribution during 2021

was $2,040,000, or $0.12 per Trust Unit, and was made on May 14, 2021 to Trust unitholders owning Trust Units as of April 30,

Such distribution included the net proceeds of production collected by VOC Brazos from January 1, 2021 through March 31,

The third quarterly distribution during 2021 was

$2,720,000, or $0.16 per Trust Unit, and was made on August 13, 2021 to Trust unitholders owning Trust Units as of July 30, 2021.

distribution included the net proceeds of production collected by VOC Brazos from April 1, 2021 through June 30, 2021.

2021 and was net of $182,917 withheld by the Trustee towards the building of the cash reserve described above.

Advance for Trust Expenses

1 unchanged sentence

is allowed to borrow money to pay Trust expenses.

During the three and nine months ended September 30, 2022 and 2021, there were

no borrowings or amounts owed for money borrowed in previous quarters.

Under the terms of the Trust Agreement, VOC Brazos has provided

a letter of credit in the amount of $1.7 million to the Trustee to protect the Trust against the risk that it does not have sufficient

cash to pay future expenses.

During the three months ended March 31, 2023 and 2022, there were no borrowings

or amounts owed for money borrowed in previous quarters.

Under the terms of the Trust Agreement, VOC Brazos has provided a letter of credit

in the amount of $1,700,000 to the Trustee to protect the Trust against the risk that it does not have sufficient cash to pay future expenses.

Subsequent Events

On October 20, 2022, the Trust announced a Trust

distribution of net profits for the fourth quarterly distribution during 2022.

Unitholders of record on October 31, 2022 will receive

a distribution amounting to $6,205,000, or $0.365 per Trust Unit, which will be paid on November 14, 2022.

Such distribution is net

of $356,470 withheld by the Trustee towards the building of the cash reserve described in Note 7.

Trustee’s Discussion and Analysis of Financial Condition

and Results of Operations.

The following discussion of the Trust’s

financial condition and results of operations should be read in conjunction with the financial statements and notes thereto.

purpose is, in general, to hold the net profits interest, to distribute to the Trust unitholders cash that the Trust receives in respect

of the net profits interest and to perform certain administrative functions in respect of the net profits interest and the Trust Units.

The Trust derives substantially all of its income and cash flows from the net profits interest.

All information regarding operations has

been provided to the Trustee by VOC Brazos.

On April 20, 2023, the Trust announced a Trust

distribution of net profits for the first quarterly payment period ended March 31, 2023.

Unitholders of record on May 1, 2023

will receive a distribution amounting to $3,910,000, or $0.23 per Trust Unit, which will be paid on May 12, 2023.

Trustee’s Discussion and Analysis of Financial Condition and Results of Operations.

The following discussion of the Trust’s financial

condition and results of operations should be read in conjunction with the financial statements and notes thereto.

The Trust’s purpose

is, in general, to hold the net profits interest, to distribute to the Trust unitholders cash that the Trust receives in respect of the

net profits interest and to perform certain administrative functions in respect of the net profits interest and the Trust Units.

derives substantially all of its income and cash flows from the net profits interest.

All information regarding operations has been provided

to the Trustee by VOC Brazos.

Results of Operations

Results of Operations for the Quarters Ended September 30,

2022 and 2021

The following is a summary of income from net

profits interest received by the Trust for the three months ended September 30, 2022 and 2021 consisting of the July distribution

for each respective year:

Results of Operations for the Quarters Ended March 31, 2023

The following is a summary of income from net profits

interest received by the Trust for the three months ended March 31, 2023 and 2022 consisting of the January distribution for

each respective year:

Three months ended

September 30,

Sales volumes:

16 unchanged sentences

The cash received by the Trust from VOC Brazos

during the quarter ended September 30, 2022 substantially represents the production by VOC Brazos from March 2022 through May 2022.

The cash received by the Trust from VOC Brazos during the quarter ended September 30, 2021 substantially represents the production

by VOC Brazos from March 2021 through May 2021.

The revenues from oil production are typically received by VOC Brazos one month

after production.

Oil and natural gas sales were $14,203,250 for the three months ended September 30, 2022, an increase of

$6,264,894 or 78.9% from $7,938,356 for the three months ended September 30, 2021.

Revenues are a function of oil and natural

gas sales volumes and prices received.

The increase in gross proceeds was due to an increase in oil sales volumes and increases in

market prices for oil and natural gas sales, partially offset by a decrease in natural gas sales volumes during the third quarter of

During the three months ended September 30, 2022, the average price for oil increased 75.5% to $104.64 per Bbl and the

average price for natural gas increased 102.1% to $6.65 per Mcf.

Oil sales volumes were 131,018 Bbls for the three months ended

September 30, 2022, an increase of 2,204 Bbls or 1.7% from 128,814 Bbls for the three months ended September 30,

2021, while natural gas sales volumes were 74,199 Mcf, a decrease of 4,535 Mcf or 5.8% from 78,734 Mcf for the same period in

Lease operating expenses were $3,851,595 for the three months ended September 30, 2022, an increase of $782,325 or 25.5% from $3,069,270

for the three months ended September 30, 2021.

Production and property taxes were $645,568 for the three months ended September 30,

2022, an increase of $37,492 or 6.2% from $608,076 for the same period in 2021.

Such increase is the result of an increase of $196,853

or 101.9% in production taxes due primarily to higher sales volumes for oil and higher sales prices for oil and natural gas partially

offset by a decrease of $159,361 or 38.4% in property taxes resulting primarily from a timing difference as to when payments are normally

Development expenses were $1,084,572 for the three months ended September 30, 2022, an increase of $377,903 or 53.5% from $706,669

for the same period in 2021.

Such increase was primarily due to an increase in drilling activity and development expenses, which included

drilling costs associated with two horizontal wells in Texas during the three months ended September 30, 2022, compared to the three

months ended September 30, 2021.

of revenues over direct operating expenses and lease equipment and development costs .

The excess of revenues over direct operating

expenses and lease equipment and development costs from the underlying properties was $8,621,515 for the three months ended September 30,

2022, an increase of $5,067,174 or 142.6 % from $3,554,341 for the three months ended September 30, 2021.

The Trust’s 80% net

profits interest of these totals was $6,897,212 and $2,843,473, respectively.

During the three months ended September 30, 2022 and

2021, VOC Brazos did not withhold or release any dollar amounts due to the Trust from the previously established cash reserve for future

development, maintenance or operating expenditures, which resulted in income from the net profits interest of $6,897,212 and $2,843,473

for such periods, respectively.

These amounts were reduced by a Trust holdback for current estimated expenses of $215,546 and $123,473

for the three months ended September 30, 2022 and 2021, respectively, and a Trust holdback for future estimated expenses of $221,666 for

the three months ended September 30, 2022.

The Trustee paid general and administrative expenses of $161,324 for the three months

ended September 30, 2022, a decrease of $13,179 from $174,503 for the three months ended September 30, 2021.

This decrease was

primarily due to the differences in timing of receipt and payment of recurring general and administrative expenses.

These factors resulted

in distributable income for the three months ended September 30, 2022 of $6,460,000, an increase of $3,740,000 from $2,720,000 for

the three months ended September 30, 2021.

Results of Operations for the Nine Months Ended September 30,

2022 and 2021

The following is a summary of income from net

profits interest received by the Trust for the nine months ended September 30, 2022 and 2021 consisting of the January, April and

July distributions for each respective year:

Nine months ended

September 30,

Sales volumes:

Natural gas (Mcf)

Average sales prices:

Oil (per Bbl)

Natural gas (per Mcf)

during the quarter ended March 31, 2023 substantially represents the production by VOC Brazos from September 2022 through November 2022.

The cash received by the Trust from VOC Brazos during the quarter ended March 31, 2022 substantially represents the production

by VOC Brazos from September 2021 through November 2021.

The revenues from oil production are typically received by VOC Brazos

one month after production.

Gross proceeds .

Natural gas sales

Total gross proceeds

Production and development costs:

Lease operating expenses

Production and property taxes

Development expenses

Excess of revenues over direct operating expenses and lease equipment and development costs

Times net profits interest over the term of the Trust

Income from net profits interest before reserve adjustments

VOC Brazos reserve for future development, maintenance or operating expenditures

Income from net profits interest

The cash received by the Trust from VOC

Brazos during the nine months ended September 30, 2022 substantially represents the production by VOC Brazos from September 2021

through May 2022.

The cash received by the Trust from VOC Brazos during the nine months ended September 30, 2021 substantially

represents the production by VOC Brazos from September 2020 through May 2021.

The revenues from oil production are typically

received by VOC Brazos one month after production.

Oil and natural gas sales were $35,084,875 for the nine months ended September 30, 2022, an increase of

$15,871,691 or 82.6% from $19,213,184 for the nine months ended September 30, 2021.

Revenues are a function of oil and natural

gas sales prices and volumes sold.

The increase in gross proceeds was due to increases in market prices for oil and natural gas and

an increase in oil sales volumes, partially offset by a decrease in natural gas sales volumes during the nine months ended September 30,

During the nine months ended September 30, 2022, the average price for oil increased 79.0% to $85.73 per Bbl and the average

price for natural gas increased 134.0% to $6.27 per Mcf.

Oil sales volumes were 391,719 Bbls for the nine months ended September 30,

2022, an increase of 5,303 Bbls or 1.4% from 386,416 Bbls for the nine months ended September 30, 2021, while natural gas sales

volumes were 239,254 Mcf, a decrease of 24,617 Mcf or 9.3% from 263,871 Mcf for the same period in 2021.

Lease operating expenses were $10,557,018 for the nine months ended September 30, 2022, an increase of $1,993,219 or 23.3% from

$8,563,799 for the nine months ended September 30, 2021.

Production and property taxes were $1,629,778 for the nine months

ended September 30, 2022, an increase of $150,048 or 10.1% from $1,479,730 for the nine months ended September 30, 2021.

Such increase is primarily due to an increase of $124,776 or 14.4% in production taxes due primarily to higher sales volumes for oil

and higher sales prices for oil and natural gas along with an increase of $25,272 or 4.1% in property taxes.

Development expenses

were $1,907,355 for the nine months ended September 30, 2022, a decrease of $97,118 or 4.8% from $2,004,473 for the same period

Such decrease was primarily due to decreased development expenses during the nine months ended September 30, 2022, compared

to the nine months ended September 30, 2021.

of revenues over direct operating expenses and lease equipment and development costs.

The excess of revenues over direct

operating expenses and lease equipment and development costs from the underlying properties was $20,990,724 for the nine months ended

September 30, 2022, an increase of $13,825,542 or 193.0% from $7,165,182 for the nine months ended September 30, 2021.

Trust’s 80% net profits interest of these totals was $16,792,579 and $5,732,146, respectively.

During the nine months ended September

30, 2022 and 2021, VOC Brazos did not withhold or release any dollar amounts due to the Trust from the previously established cash reserve

for future development, maintenance or operating expenditures, which resulted in income from the net profits interest of $16,792,579 and

$5,732,146 for such periods, respectively.

These amounts were reduced by a Trust holdback for current estimated expenses of $735,079 and

$462,146 for the nine months ended September 30, 2022 and 2021, respectively, and a Trust holdback for future estimated expenses

of $587,500 for the nine months ended September 30, 2022.

The Trustee paid general and administrative expenses of $772,288 for the

nine months ended September 30, 2022, an increase of $35,940 from $736,348 for the nine months ended September 30, 2021.

increase was primarily due to the differences in timing of receipt and payment of recurring general and administrative expenses.

factors resulted in distributable income of $15,470,000 for the nine months ended September 30, 2022 and $5,270,000 for the nine

months ended September 30, 2021.

Oil and natural gas sales

were $11,195,578 for the three months ended March 31, 2023, an increase of $688,512 or 6.6% from $10,507,066 for the three months

ended March 31, 2022.

Revenues are a function of oil and natural gas sales prices and volumes sold.

The increase in gross proceeds

was due to increases in market prices for oil and natural gas, partially offset by decreases in oil and natural gas sales volumes during

the first quarter of 2023.

During the three months ended March 31, 2023, the average price for oil increased 12.1% to $82.73 per

Bbl and the average price for natural gas increased 32.4% to $7.65 per Mcf.

During the three months ended March 31, 2023, oil sales

volumes were 127,600 Bbls, a decrease of 8,162 Bbls or 6.0% from 135,762 Bbls for the three months ended March 31, 2022, while natural

gas sales volumes were 83,501 Mcf, a decrease of 1,131 Mcf or 1.3% from 84,632 Mcf for the same period in 2022.

Lease operating expenses were $4,022,303

for the three months ended March 31, 2023, an increase of $563,409 or 16.3% from $3,458,894 for the three months ended March 31,

Production and property taxes were $893,958 for the three months ended March 31, 2023, an increase of $228,167 or 34.3% from

$665,791 for the same period in 2022.

Such increase is primarily due to a $210,389 or 57.5% increase in property taxes along with a $17,778

or 5.9% increase in production taxes due to higher sales prices.

Development expenses were $868,377 for the three months ended March 31,

2023, an increase of $376,229 or 76.4% from $492,148 for the same period in 2022.

Of this increase, approximately $200,000 is associated

with the completion costs of two horizontal wells in Texas with the remainder being attributable to increased development expenses during

the three months ended March 31, 2023, compared to the three months ended March 31, 2022.

Excess of revenues over direct operating expenses

and lease equipment and development costs .

The excess of revenues over direct operating expenses and lease equipment and development

costs from the underlying properties was $5,410,940 for the three months ended March 31, 2023, a decrease of $479,293 or 8.1% from

$5,890,233 for the three months ended March 31, 2022.

The Trust’s 80% net profits interest of these totals were $4,328,752

and $4,712,186, respectively.

During the three months ended March 31, 2023 and 2022, VOC Brazos did not withhold or release any dollar

amounts due to the Trust from the previously established cash reserve for future development, maintenance or operating expenditures, which

resulted in income from the net profits interest of $4,328,752 and $4,712,186 for such periods, respectively.

These amounts were reduced

by a Trust holdback for current estimated expenses of $187,722 and $279,269 for the three months ended March 31, 2023 and 2022, respectively,

and a Trust holdback for future estimated expenses of $231,030 and $182,917 for the three months ended March 31, 2023 and 2022, respectively.

The Trustee paid general and administrative expenses of $375,563 for the three months ended March 31, 2023, an increase of $1,798

from $373,765 for the three months ended March 31, 2022.

These factors resulted in distributable income for the three months ended

March 31, 2023 of $3,910,000, a decrease of $340,000 from $4,250,000 for the three months ended March 31, 2022.

Liquidity and Capital Resources

Other than Trust administrative expenses, including

any reserves established by the Trustee for future liabilities, the Trust’s only use of cash is for distributions to Trust unitholders.

Administrative expenses include payments to the Trustee as well as a quarterly administrative fee to VOC Brazos pursuant to an administrative

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excess cash, if any, received by the Trust from the net profits interest and other sources (such as interest earned on any amounts reserved

by the Trustee) in that quarter, over the Trust’s expenses paid for that quarter.

Available funds are reduced by any cash that

the Trustee decides to reserve for future development, maintenance or operating expenses.

As of September 30, 2022, $837,495 was

by the Trustee) in that quarter, over the Trust’s expenses paid for that quarter.

Available funds are reduced by any cash

that the Trustee decides to reserve for future development, maintenance or operating expenses.

As of March 31, 2023, $1,292,066 was

held by the Trustee as such a reserve.

The Trustee may cause the Trust to borrow funds

required to pay expenses if the Trustee determines that the cash on hand and the cash to be received are insufficient to cover the Trust’s

If the Trust borrows funds, the Trust unitholders will not receive distributions until the borrowed funds are repaid.

the three and nine months ended September 30, 2022 and 2021, there were no such borrowings.

During the three months ended March 31, 2023 and 2022, there were no such borrowings.

VOC Brazos has provided a letter of credit

in the amount of $1.7 million to the Trustee to protect the Trust against the risk that it does not have sufficient cash to pay future

previously disclosed, the Trustee intends to build a reserve for the payment of future known, anticipated or contingent expenses or liabilities.

The Trustee intends to withhold a portion of the proceeds otherwise available for distribution each quarter to gradually build

a cash reserve to approximately $1.175 million.

This amount is in addition to the $1.7 million letter of credit described above.

The Trustee may increase or decrease the targeted amount at any time and may increase or decrease the rate at which it is withholding

funds to build the cash reserve at any time, without advance notice to the unitholders.

Cash held in reserve will be invested as required

by the Trust Agreement.

Any cash reserved in excess of the amount necessary to pay or provide for the payment of future known, anticipated

or contingent expenses or liabilities eventually will be distributed to unitholders, together with interest earned on the funds.

elected to withhold $587,500 from the proceeds otherwise available for distribution through September 30, 2022 towards the building

of the cash reserve described above.

Beginning in the first quarter of 2022, the Trustee

withheld a portion of the proceeds otherwise available for distribution each quarter to gradually build a $1.175 million cash reserve

for the payment of future known, anticipated, or contingent expenses or liabilities of the Trust.

This amount is in addition to the $1.7

million letter of credit described above.

The Trustee may increase or decrease the targeted amount at any time and may increase or decrease

the rate at which it is withholding funds to build the cash reserve at any time, without advance notice to the unitholders.

in reserve will be invested as required by the Trust Agreement.

Any cash reserved in excess of the amount necessary to pay or provide

for the payment of future known, anticipated or contingent expenses or liabilities eventually will be distributed to unitholders, together

with interest earned on the funds.

The targeted $1.175 million cash reserve was fully funded as of January 30, 2023.

Income to the Trust from the net profits interest

is based on the calculation and definitions of “gross proceeds” and “net proceeds” contained in the conveyance.

substantially all of the underlying properties are located in mature fields, VOC Brazos does not expect future costs for the underlying

properties to change significantly compared to recent historical costs other than changes due to fluctuations in the general cost of oilfield

VOC Brazos may establish a cash reserve of up to $1.0 million in the aggregate at any given time from the dollar amount

otherwise distributable to the Trust to reduce the impact on distributions of uneven capital expenditure timing.

The cash reserve

balance was $1.0 million at September 30, 2022 and 2021.

is based on the calculation and definitions of “gross proceeds”

and “net proceeds”

contained in the conveyance.

As substantially all of the underlying properties

are located in mature fields, VOC Brazos does not expect future costs for the underlying properties to change significantly compared to

recent historical costs other than changes due to fluctuations in the general cost of oilfield services.

VOC Brazos may establish

a cash reserve of up to $1,000,000 in the aggregate at any given time from the dollar amount otherwise distributable to the Trust to reduce

the impact on distributions of uneven capital expenditure timing.

The cash reserve balance was $1,000,000 on March 31, 2023 and 2022,

respectively.

Note Regarding Forward-Looking Statements

This Form 10-Q includes “forward-looking

statements” within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities

Exchange Act of 1934, as amended (the “Exchange Act”).

This Form 10-Q includes “forward-looking

statements”

within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities

Exchange Act of 1934, as amended (the “Exchange Act”).

All statements other than statements of historical fact included in

this Form 10-Q, including without limitation the statements under “Trustee’s Discussion and Analysis of Financial Condition

and Results of Operations”, are forward-looking statements.

this Form 10-Q, including without limitation the statements under “Trustee’s Discussion and Analysis of Financial Condition

and Results of Operations”

are forward-looking statements.

Although VOC Brazos advised the Trust that it believes that the expectations

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to have been correct.

Important factors that could cause actual results to differ materially from expectations (“Cautionary Statements”)

are disclosed in this Form 10-Q and in the Trust’s Annual Report on Form 10-K for the year ended December 31, 2021

(the “Form 10-K”), including under the section “Item 1A.

Risk Factors”.

All subsequent written and oral

forward-looking statements attributable to the Trust or persons acting on its behalf are expressly qualified in their entirety by the

Cautionary Statements.

Important factors that could cause actual results to differ materially from expectations (“Cautionary Statements”)

are disclosed in the Trust’s Annual Report on Form 10-K for the year ended December 31, 2022 (the “Form 10-K”),

including under the section “Item 1A.

Risk Factors”.

All subsequent written and oral forward-looking statements attributable

to the Trust or persons acting on its behalf are expressly qualified in their entirety by the Cautionary Statements.

Quantitative and Qualitative Disclosures About Market Risk.

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Compared sentence by sentence after normalising whitespace, quotation marks, case and digits, so re-formatting and restated figures do not read as changed language. Wording changes appear as one removal and one addition. The current filing and the prior one are authoritative.

What changed 10-Q

Item 1. Financial Statements